Business Incentive Plans

Three different incentive plans used in the workforce are bonuses, incentive rewards, and profit sharing. The positives of employee bonuses are that they may come around the end of the year during the holiday season. 

Bonuses usually increase in amount the higher an employee climbs within a company/organization; in addition, from an employer's point of view, a company with cash flow issues can continue to motivate employees with bonuses, as opposed to committing to ongoing uniform pay increases.

The negatives of bonuses include the fact that bonuses are determined by the success of a company - bonuses may change from year to year; a received bonus this year may be less than previous years, which could cause mixed feelings among employees.

Bonuses may also cause an adverse effect on an organization's profitability and growth, a difference in bonus amounts within employee ranks may cause mixed feelings. Also, bonuses have the ability to create tension within employee ranks based on an individual's self-worth.

Incentive rewards are also a way to motivate an individual, team/department, as well as an entire branch or region. Incentive rewards show appreciation to employees, improve employee/company performance, as well as shape/create behaviors appealing to management.

Incentive rewards offer a way for employees to stay motivated in order to achieve a personal or company goal.

Some negatives about incentive rewards is the fact that this program may cause more individualism, as opposed to a team-oriented atmosphere. A rewards program that does not appeal to certain employees will fail to motivate, ultimately defeating the purpose; in addition, it may be difficult to create a uniformed gauge in order to appoint payouts/rewards, in a case involving various branches, teams, individuals, and subordinates.

Lastly, profit sharing within a company may help motivate employees by offering a piece of a company's success, it could be profits from a previous or current fiscal year. With this option, there are added tax benefits, if an employee is able to add this to his/her 401k or other program, then he/she may see tax benefits.

Profit sharing creates a team-oriented atmosphere, when individual employees understand their hard work steers the success of a company, then he/she will work together with other employees to accomplish more; in addition, profit sharing, from an employer's perspective, keeps the amount of money given to employees in check, the success of the business gauges the amount of money rewarded to employees.

Negatives of this program are the fact that profit sharing again creates division; lower-paid employees might have less of an incentive to help with the profit of their company because of their smaller profit share. Employees in different positions within a company, such as entry-level employees, may not fully understand how their actions affect the scheme of profit sharing, causing less of a general profit.

Profit sharing can also cause a marketing or sales firm to sell/market products they may not otherwise touch. If one product is failing, it is possible for a company to latch on to another product, more out of desperation than want, in order to reach a goal set for a higher profit share.

Some believe a bonus incentive would have more of an appeal. A bonus from the beginning, would aid in motivating employees, supervisors, as well as management.